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Britain’s energy revolution


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Business Spotlight - epaper ⋅ Ausgabe 1/2022 vom 15.12.2021

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Green energy: a wind farm off the coast of Redcar on Teesside

In October 1862, with Britain being the world’s leading industrial power, soon-to-be prime minister William Gladstone visited the north-eastern English coastal town of Middlesbrough. It was, Gladstone said, a “remarkable place, the youngest child of England’s enterprise” and nothing less than “an infant Hercules”.

In 1801, Middlesbrough had been home to just 25 people. A century later, powered by the iron industry, it had 90,000 inhabitants. “There was something almost superhuman about the town’s early industrialization,” historian David Taylor has written.

By 1931, this former hamlet had been transformed into a bustling industrial town of 140,000 people. Iron and steel — and, later, huge chemical factories — made the area one of the world’s great heavy industrial hubs. The Middlesbrough region’s fall since then has been devastating, however. Tens of thousands of industrial jobs have ...

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... been lost, young talent has been lured away “down south” and there is high unemployment, poor health outcomes and low life expectancy.

A sign of hope

I was born just outside Middlesbrough in the 1970s, when the wider Middlesbrough area of Teesside had long been in decline. By the time I was thinking about a career, jobs for life were becoming rare and the town had the look and feel of being left to rot. The once thriving industrial powerhouse had become a shadow of its former dynamic self.

Though it shouldn’t be overstated, there is now a glimmer of hope. It comes in the form of hydrogen, the substance that every country on the planet is hoping will play a role in its carbon-neutral strategy. A recent Economist article suggests that “hydrogen technologies could eliminate perhaps a tenth of today’s greenhouse-gas emissions by 2050”.

At present, the Tees Valley region produces more than half of the UK’s hydrogen, and a range of government agencies and private companies have decided to locate cutting-edge hydrogen projects there. Teesside also won a bid to house two hydrogen refuelling stations and a fleet of cars, one in Middlesbrough and the other in Redcar, a few miles along the coast.

In need of a boost

In June 2021, Redcar was also named as the location of the world’s first pilot test to use “hydrogen as a potential alternative to a household gas supply”. Natural gas is responsible for more than 30 per cent of the UK’s carbon emissions. If the test is successful, the aim is to scale it up to considerably reduce the use of natural gas in UK homes from its current level of 85 per cent.

This year, energy giant BP announced that it would make Teesside the home of the “UK’s largest blue hydrogen production facility”. The blue hydrogen will be converted from natural gas (see the box on page 13 for a description of the different types of hydrogen). The area is home to major wind turbine network parks, as well as Net Zero Teesside, a major carbon capture, utilization and storage project.

Further positive news came in October 2021, when green hydrogen specialist firm Protium announced that it would create on Teesside the area’s “largest green hydrogen project to date”, helping companies to decarbonize heavy industry.

Why is Teesside the chosen location for all these projects? It has the space, the industrial heritage and the local expertise in hydrogen storage and pipelines. And with little to cheer in recent decades — including the Middlesbrough football club, which is untypically still owned by a local businessman — the region needs a boost like few other places in the UK do.

The role of Scotland

Further north, Scotland is also laying claim to being a hotbed of hydrogen. Like Teesside, it has a scheme to test the use of hydrogen in housing instead of natural gas. But it is the potential of a green hydrogen link-up with Germany that has captured the imagination.

The governments of Scotland, Germany and the UK have all released their hydrogen strategy papers in the past two years. Though none of the strategies are without critics, all see hydrogen as central to a carbon-neutral future.

Nigel Holmes, CEO of the Scottish Hydrogen & Fuel Cell Association, says these strategy papers have been pivotal in the buzz surrounding hydrogen’s potential. With the 2050 carbon-neutrality target on the horizon, experts believe that hydrogen could meet around a quarter of world energy demand by that date.

A similar prognosis propelled the Scottish-born but long-time Munich resident David Scrimgeour to team up with German Sylvia Trage, director of consulting, value chain transformation, at KPMG. Scrimgeour, who heads DS Consulting, has an extensive network of contacts in business and politics in both countries, many of which came from his earlier work in encouraging German firms to locate in Scotland. He and Trage have been working on Scot2Ger, a project linking the Scottish and German governments and businesses to explore the potential of Scotland supplying Germany with green hydrogen as early as the mid-2020s.

The perfect partnership?

So, why Scotland and why Germany? Simple, says Scrimgeour: “because Scotland has the capacity to produce enough green hydrogen and Germany needs it” to reach its 2050 carbonneutrality goals. In 2019, Germany produced 42 per cent of its electricity from renewable sources. But this is insufficient for meeting its 2050 target.

The German government is already exploring deals with Middle Eastern and North African countries for hydrogen produced from solar power, but possible instability in both regions is a worry. “Our vision,” says Trage, “is first to set up a business [to take green] hydrogen from Scotland to Germany. Then you can scale it up to take it also from Norway or Iceland or wherever.”

Scrimgeour and Trage see Scotland’s experience in the oil and gas sector as a major plus point. Nigel Holmes also points to Scotland’s “long heritage of energy production” and the coalfields that made it “one of the cradles of the Industrial Revolution”.

More recently, the discovery of oil in the North Sea produced “a second energy revolution that essentially powered much of the UK” for years. Holmes says that “the North Sea is potentially the cradle of a third energy revolution”. In 2020, renewable sources covered 97.4 per cent of Scotland’s annual electricity demand, up from 37 per cent in 2011. Currently, Scotland’s main source of renewable power is onshore wind (around 70 per cent), then hydro and offshore wind. Rapid expansion of all three (plus some solar) continues. The ultimate aim is for Scotland to transition rapidly from being an exporter of oil and gas to an exporter of renewable energy.

THE COLOURS OF HYDROGEN

Hydrogen is produced from raw materials such as natural gas, oil and coal. It comes in various forms:

Grey hydrogen is cheap and produced from fossil fuels. It is often CO 2-intensive and therefore a major contributor to climate change.

Blue hydrogen is more expensive. Unlike in the case of grey hydrogen, the CO 2 that is emitted is sequestered by means of carbon capture and storage. It is therefore better for the environment.

Green hydrogen is more expensive than grey or blue hydrogen. It is produced from renewable energy sources via electrolysis and it has zero emissions.

Hydrogen challenges

The role that hydrogen will play in achieving carbon neutral targets is still an open question, however. Hydrogen is more unstable than natural gas and it is difficult to store and transport. It is still not clear whether existing natural gas pipelines in Germany could eventually be used for hydrogen. Trage and Scrimgeour are currently trying to find solutions to such challenges. A further major challenge is the market: the price of hydrogen is much higher than that of natural gas, though the gap is narrowing.

Motivated by the demand for carbon neutrality, green hydrogen created from renewable sources (solar power, wind power and hydropower) may appear to be something of a silver bullet for countries and companies with limited time to transition. But significant private and public investment in research and development is required. Scot2Ger is already involved with major companies in doing feasibility studies. Pilot projects on electrolysers and transportation networks will follow.

Teesside’s next step

A few hours south of Scotland, the people of Teesside have their own hydrogen vision of the future. Middlesbrough is no longer the beating heart of an old-style industrial region. And the days of being described as an “infant Hercules” are long gone. But the region is not without hope. Its long industrial heritage is being seen as an advantage rather than a hindrance. This, along with the existing infrastructure, business knowledge and skilled workforce, is helping the region to establish itself as one of Europe’s leading hydrogen hubs.

Blue hydrogen projects such as those on Teesside remain controversial in the transition to carbon neutrality. But as a fast-growing hydrogen hub, the area is already attracting more green hydrogen projects. And in the longer term, locals hope that a region that was at the forefront of the Industrial Revolution can play a significant role in helping to decarbonize the planet.

CARBON-ZERO SCOTCH

Whisky is of huge importance for Scotland’s economy, worth around £5.5 billion (€6.5 billion) a year. Nigel Holmes, CEO of the Scottish Hydrogen & Fuel Cell Association, says that many “whisky companies are looking at projects that will help them decarbonize their whisky production”. High-quality malt made now “won’t hit the market until probably 2030, because it is matured for 10 or 12 years before it’s released,” he says.

By then, manufacturers “anticipate consumers are going to be far more informed about the carbon footprint of all of their purchases,” says Holmes. Many whisky companies therefore aim to be at net zero as soon as possible. One is the famous Bruichladdich distillery on the island of Islay, which hopes that green hydrogen will ensure its distillation process is net zero by 2025.